Monday reading 09-25-2006

Ryan Homes pulls out of Old Trail. I have mixed opinions on this. I am still discerning what this means from a market point of view and second, my confidence in “the people” is heightened for some reason.

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Ryan may be pulling out of Old Trail, but they are moving into Fluvanna. Ryan is building homes at the new Sycamore Square. They listed one home, but judging by the progress on the excavation, they are still weeks away from breaking ground. It will be interesting to see how they fair.

Oh, yes, they are everywhere. Unfortunately, I couldn’t link to their search results page, but they are in at least 12 communities in the region. They are far from dead, and add a certain level of competition to the market.

I must disagree with your first assertion, “It’s far too easy to get a real estate license.” To the contrary, real estate licensing should be ended, for the very same reasons listed in the article you cited. Licensing lends a false sense of security to the buying public, with devastating consequences. Removing it would force people to wake up and realize that when they’re buying a home, they can’t trust the agent to represent their interests.

Too often, that’s the biggest mistake buyers make. They don’t realize that agents represent the seller’s interests, even when it’s spelled out to them. Deep in their subconcious minds, they believe that somehow all that is secondary to the fact that the agent is licensed by the state, and that the license will protect buyer somehow. That way, they don’t really have to take responsibility for making sure that the house they’re buying is really a good buy and is really right for them. Only after the sale and something goes wrong does reality set in. At that point, it’s too late. Licensing bears a much larger part of the responsibility than either the author of the article and most realtors are willing to admit.

Also, it’s not the job of the state to teach people how to sell real estate, to understand the real estate market, etc. That’s the broker’s responsibility and agent’s responsibility. If the broker wants to require that his/her agents must pay for and take a certain amount of classroom training, that should be up to the broker. After all, it’s the broker’s business we’re talking about, and it’s the broker who does the hiring. That’s why it should be up to the broker to set the standards for that agency. And if the broker hires stupidly, then the broker should pay the price in lost sales and lawsuits.

Licensing also fosters the idea that all agencies are the same. Even real estate agents should be opposed to that!

Licensing places a false barrier in the way that does more harm than good. After all, contractors are licensed too…yet look how bad so many of them are at producing new homes. Contractor Mike Holmes of the TV show “Holmes on Homes” estimates that you have to talk to 25 contractors if you want to have a reasonable chance of finding a good, reliable one who will do a good job that meets minimum code. Even then, he recommends that you also hire an independent inspector to check on the work being done as it’s being done, to keep the contractor in line. He estimates that over 80% of the new homes produced in this country are put together slapdash, counting on the gov’t inspectors to only inspect a sampling of the units. Then, they can get away with “cutting corners” like crazy.

Worse, if you buy a home from such a contractor, and you complain about some part of it that was done wrong, you’ll be lucky if the problem actually get fixed. In many cases, the contractor will send out laborers who don’t speak English. If you can’t explain to them what needs fixing, they’ll give up and go away. A contractor who actually goes out to a problem site himself and gets it fixed himself is as rare as hens’ teeth. If you’re the buyer, you have to be as stubborn as a bulldog to get such problems fixed.

Also, real estate law only allows you to withhold 10% of payment until such problems are fixed. If the problem is actually worth more than 10% of the payment…well, too bad! You can thank licensing for that, since licensing makes it “safe” to limit the withholding of payment in such instances to more than 10% of the purchase price.

This shabby state of affairs is a direct result of state licensing, which lulls the real estate buying public into a false sense of security to everyone’s detriment.

Ever heard of a license to steal? The phrase is based in reality. Let’s stop licensing incompetence, deception, false claims, rampant violations of building codes, and legalized lying.

But getting back to real estate selling, the contractors’ licensing situation shows how counterproductive licensing truly is. The real estate industry is in desperate need of a shakeup, both among contractors and among brokers and agents. Increasing licensing requirements will only help the industry to avoid this reality. Eliminating licensing will sound a loud wakeup call.

I have never, in 16 years, had a consumer ask to see my license or ask if I were licensed. I honestly don’t think the reason we are licensed ha anything to do with a “message TO the public”. It is a message to licensees that their license can be pulled for wrong doings. In fact, that is the major, or not ONLY message, of the licensing process.

I liken real estate (at least how I practice/attempt to perform) to many other professions – attorney, stock broker, doctor – all of which often manage seemingly life-or-death situations. Should these professions have no licensing authority managing them either?

Also, it’s not the job of the state to teach people how to sell real estate, to understand the real estate market, etc. That’s the broker’s responsibility and agent’s responsibility.

Here, I definitely agree with you, but do not have an adequate solution (yet). Somebody has to license them, and if the Realtor association were to set some arbitrary limit through which one must pass, they would be accused of collusion/anti-competitive practices.

What is the answer? No licensing is not the answer.

I agree with Ardell in that no one has ever asked to see my license (other than for entry into Lake Monticello’s gates). I have been asked how long I have been in real estate, and many of the “Dummies” books, et. al. recommend verifying an agent’s license with the state.

In short, there has to be some relationship between the state and the real estate professional. As it stands, that relationship does provide a false sense of security/professionalism.

[…] K Hovnavian slashing development By Jim Duncan I moved this to its own story, from today’s “Links” post, because they represent the second builder (Ryan was first) to announce major changes. Interestingly, while local builders have seemingly made some significant changes to their pricing and development strategies, it is the national builders who seem most affected. Perhaps the smaller builders are more nimble and able to alter their course? Were national builders more prone to over-extending themselves? I don’t yet know, but remain interested in these developments. […]

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About Jim Duncan

I am a Realtor/Broker/Partner with Nest Realty in Charlottesville, Virginia. The goal of this site/blog remains unchanged in the nearly 15 years since its founding – to provide clear, coherent, unbiased analysis of the Charlottesville area real estate market.